When we launched the new Backpack, we were going to increase the prices across the board. It was a big overhaul and we felt the improvements were worth it.
But at the last minute, we changed our minds and decided to let old customers keep using Backpack the same way for the same price (or less).
Why? We didn’t want the excitement of the new launch to be drowned out by customers upset by a rate hike. We feared the new Backpack’s good vibes would get hijacked by pricing naysayers. So we took that possibility off the table.
The result: A decent number of people thanked us for grandfathering them at the same (or a lower) rate. But to most it was a non-story. And in this case, a non-story was a big win. It let the spotlight shine on the good news instead.
Lesson learned: Don’t tackle your own good news. The blogosphere can be an unforgiving place. Take pains to eliminate any negative aspects that might overshadow a launch or other good news.
Anonymous Coward
on 10 Jun 08Then make a post telling them how you were gonna screw them over but decided not to.
Glory hogs
David Andersen
on 10 Jun 08That’s one way to look at it. But you’ll never know how a price increase would have been perceived so I don’t think you’ve really got a ‘lesson learned’ here. It’s guesswork at best.
JF
on 10 Jun 08David, every time we’ve raised prices in the past we’ve seen good news overshadowed. Even if we were giving people twice the capacity they had before, but only raising prices 10%, it wasn’t well received. It wasn’t guesswork.
designslave
on 10 Jun 08I disagree with the two comments above. I think what you did was a nice way to go about it.
Hank
on 10 Jun 08Doesn’t it seem kind of strange to be posting about this now, some four months after the fact.
It indicates either one of two things to me. Either:
1. The uptake in new subscriptions didn’t rise as high as wanted, or
2. (which kind of relates to #1) This is yet another way to make people feel they are getting more value than they are paying for … which hopefully turns into more sales.
So if 37signals won’t directly say it, I will.
People, go sign-up for Backpack
Don Schenck
on 10 Jun 08Hilarious! Matt posts some helpful info about what works for 37 Signals. You know, a tip that … I dunno … might help another company about to go through the same process.
Also posts how tough the blogosphere can be.
And what happens? The ingrates fulfill his prophecy. He gets slammed for helping!
You can’t make this stuff up.
David Andersen
on 10 Jun 08JF -
Those past experiences are useful information; I wouldn’t have made a claim of guesswork knowing that.
Don/others -
I think you can probably see that the original post, sans any information about past experiences, could lead one to conclude that they were just guessing about the nature of the outcome vs. other options.
GeeIWonder
on 10 Jun 08@Don:
Yeah. I think that’s fair, actually. I was going to post something about how it’s pretty cheeky to say ‘lesson learned’ (which usually suggests learning it the hard way), and the problem of confirmation bias, but Matt’s point is well taken I think.
In any case, the value of not diluting your ‘message’ (even at some expense) is probably something worth remembering for most of us. A book I enjoyed that’s sort of on topic is one called “Five Frogs on a Log”.
JF
on 10 Jun 08I’m always disappointed when some people think there’s a hidden motive behind a blog post. There’s no hidden agenda or quest to bump sales, etc. It’s just a lesson we learned that we wanted to share because we thought it might help other people.
@Hank: Backpack has been our fastest growing product since the new Backpack Multiuser launch. We’re beyond thrilled with the uptake. The post just dropped into Matt’s head as he’s working on our new book. Writing something else reminded him to write about this. It has nothing to do with timing or sales or anything.
Paul M. Watson
on 10 Jun 08Good tip really. How would you have handled un-profitable old accounts though if you had to? If that price hike was necessary to remain profitable what would 37signals do, rise prices separate to a feature release or try and ease the price hike pain with new features?
JF
on 10 Jun 08Paul: The accounts weren’t unprofitable, they just weren’t profitable enough.
MikeInAZ
on 10 Jun 08I just want to thank the folks at 37Signals for being so transparent (as much as possible). They might not be right all the time, but at least they can back up their actions with sound reasoning.
I think it is acceptable for a price increase if a product or service offers something significantly new or better.
Offering more of the same, no. Offering something new, yes.
Jonathan Ng
on 10 Jun 08I saw this numerous times yesterday with people complaining about the 3g price hike for the new iPhone (which I was very disappointed in)
Greg
on 10 Jun 08Well … whatever about whatever. All I know is that it’s a good idea and you’d be surprised how untactful companies can be … especially if they feel like “they got you”. Look at how large businesses like comcast and phone companies treat you!
With my service, I have fully planned to do the same. Give the early adopters a special rate to entice them to try it … as I get more clients I can justify charging what I need to charge to pay the bills … but keeping the clients that built you up right where they are price wise, at least for some amount of time.
Tips like this and “Getting Real” have really done a lot to open me up to business practices that jive with my inner self.
Thanks guys!
Jeppe
on 10 Jun 08Great tip. Thanks for sharing.
David Andersen
on 10 Jun 08@Jonathan -
The price hike doesn’t bother me at all. The service will be better and the phone prices dropped substantially. Paying $600 for a phone, that bothered me.
So there you go, one anecdote vs. another. Not particularly strong evidence for a pricing decision either way.
Terry Sutton
on 10 Jun 08Jason and Matt – the blog-o-sphere is absolutely full of naysayers. Do reread everything sucksism.
I wouldn’t be in the least dissapointed that people are constantly looking to pick apart your posts. I would also hope that you don’t find it discouraging to sit down and write new posts.
The people who you want to have reading these posts are. The people who you don’t want to read these posts criticize.
GeeIWonder
on 10 Jun 08They’re big boys. They can handle it.
Mark Holton
on 10 Jun 08Thanks for the continued great insights. This is a good one—appreciate it
Adam Landrum
on 10 Jun 08You could have done the price “hike” and nobody would have cared. Actually, some people would have cared but those are the customers who care if you change a link color. You can do without them.
As companies, we’re paranoid to increase prices, when as consumers, if we’re getting good value, we don’t mind a price increase here and there.
It’s humorous how much we fret over it when it usually shouldn’t be a concern.
Jonathan Ng
on 10 Jun 08@David
You realize that with the price increase, the iPhone actually costs more than if you were to buy the first gen ;)
Peter Urban
on 10 Jun 08Jason, why don’t you and your crew finally admit that you are part of a special FBI squat that came up with the brilliant idea to build simple web based software to spy on small businesses?
And there is another thing: All blog posts are evil ;-)
David Andersen
on 10 Jun 08Sure Jonathan, I understand that over time the total cost is higher. I also think the price increase is in line with other providers with sufficiently less functionality and speed. In addition, I also consider it a value relative to how I will use the phone. I’ll more than get my money’s worth.
Matt Radel
on 10 Jun 08It’s not too earth shattering a concept really. Look at Apple. Plenty of times (including yesterday’s release of the iPhone 3G) they’ve offered an improved product that does more for the same price or less. The result is a happier customer base and a cult-like following.
J Lane
on 10 Jun 08I think that the timing on this is great. It’s offered as a retrospective instead of a “here’s what’s going on now”. If 37signals had said, at the time when they released the upgraded Backpack, that “we were going to raise the price, but we’re your benevolent overlords…” then that would have been cheesy.
What Matt’s written here is a great, generalizable lesson for anyone working with webapps (and specifically ones they charge for): the old way of “here’s the good news, here’s the bad news” doesn’t work as well online. The bad news usually overshadows the good news and steals all of the thunder.
Thanks Matt.
coldclimate
on 11 Jun 08I guess it’s a trade off. If you hike the rpice a bit you make more money off each transaction, but pick up some bad karma. If you don’t hike the price you make the same amount as before (assuming your costs are about the same), but you might get a few more customers (because happy people talk). If the persentage increase in cash of one side is better than the other in the short term, it does not mean it will be longterm. I can’t help thinking that not hiking prices is a better long term deal for all, but I guess the numbers will bare this out (or not).
This discussion is closed.